WTI crude futures reached close to their highest level since early December on Wednesday, closing in on $81, as optimism over China’s rebound of demand following its swift abandonment of the zero-Covid policy outweighed concerns about a global economic downturn.
At the World Economic Forum, a senior Chinese economic official predicted that this year, as Covid infections have peaked, the world’s second-largest economy and top petroleum importer will likely return to its pre-pandemic growth trajectory.
On the supply side, investors continued to be concerned about the anticipated effects of the most recent Western sanctions imposed in response to the conflict in Ukraine on Russian flows.While a revival in oil consumption in China is tempered by signs of instability elsewhere, OPEC Secretary General Haithan Al-Ghais said he is “cautiously optimistic” about the prospects for the global economy, according to Bloomberg.
Investors are now anticipating the International Energy Agency’s (IEA) report on the monthly market outlook for later on Wednesday.The expectation that China’s harsh COVID-19 regulations will be relaxed will result in a rebound in gasoline consumption in the world’s largest oil importer drove up oil prices on Wednesday, extending gains from the previous session.
Following a 1.7% gain in the prior session, Brent crude futures were up 52 cents, or 0.6%, at $86.44 a barrel. After rising by 0.4% on Tuesday, U.S. West Texas Intermediate (WTI) crude futures increased by 55 cents, or 0.7%, to $80.73 a barrel.
However, OPEC maintained its 2.22 million bpd estimate for the growth of world demand for 2023. According to Toshitaka Tazawa. Who is an analyst at Fujitomi Securities Co Ltd., “growing anticipation that China’s fuel demand will perk up. After a recent change in its COVID-19 policy offered support to oil prices.”
He stated that the market sentiment was “further encouraged by OPEC’s optimistic perspective on China’s demand,” foreseeing a bullish tone for this week. Oil priced in greenbacks is less expensive for holders of other currencies. Which stimulates purchasing.
The price of oil increased at its slowest rate in over a year. With quantities falling as a result of lower well productivity and production budget cuts brought on by inflation. The EIA predicted that American crude oil production in the largest U.S. shale oil region. The Permian in Texas and New Mexico, would increase by around 30,400 bpd to 5.64 million bpd in February. Reaching its highest level ever.
The EIA predicted that oil production in the Bakken region of North Dakota and Montana will increase by 20,000 bpd to 1.23 million bpd next month, the highest level since November 2020.
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